’30 million euro was not going to do it’: Details emerge about the project to replace the Spirit of Tasmania ferries

In October, the state-owned operator of the Spirit of Tasmania, TT- Line, received some troubling news.

A world away — in shipyards in Rauma, Finland — its two new vessels were under construction as part of a long-delayed deal worth hundreds of millions of dollars.

But the company doing the work — Rauma Marine Constructions (RMC), a partially Finland government-owned company — appeared to be on the brink.

“They said, ‘we’re having trouble’,” TT-Line chair Michael Grainger said.

“We knew that they were having trouble paying their subcontractors, they made it quite clear that their costs had escalated to an extent that they couldn’t continue.”

It was six years since TT-Line had first completed a business case for the new vessels.

It had already endured one of its chosen shipbuilding companies — FSG, in Germany — going under in 2020.

It then went through 12 months of delays after then-premier Peter Gutwein forced TT-Line to see if an Australian company could do the work instead, before going back to RMC.

With RMC in trouble, alarm bells were ringing.

But TT-Line didn’t tell Treasurer Michael Ferguson about its concerns about RMC for another two months.

The series of events was analysed on Friday during a parliamentary hearing.

Michael Grainger and Bernard Dwyer sit at a table with microphones in front of each of them

Michael Grainger and Bernard Dwyer appeared before the Tasmanian parliament’s Public Accounts Committee.(Supplied: Parliament of Tasmania)

TT-Line chief executive Bernard Dwyer said the company didn’t want any of this made public, fearing subcontractors in Finland would suddenly pull out.

“You would all be aware of what happens in a run on a bank — if something happens, the bank has got no control. Exactly the same thing would happen with suppliers,” Mr Dwyer said.

“If suppliers thought that that company was in difficulty and they weren’t going to get their money, all of the suppliers – all of the workers – would leave the site.

“It would just stop dead.”

So the situation — and the subsequent negotiations, involving tens of millions of dollars, between a Tasmanian-owned company and a partially Finnish-owned company — remained secret.

A section of red keel in a ship building yard.

One of the new Spirit of Tasmania ferries under construction in Finland.(Supplied: RMC)

Problems at home, too

That wasn’t the only problem TT-Line was grappling with.

To accommodate the two new vessels, which are larger than the existing ships, a berth at Devonport would need substantial upgrades.

Those works were priced at about $90 million in 2020.

In December, TT-Line informed the Tasmanian Treasury Department that figure was now $375 million, and the company was going back to market for tenders.

The government approved an increase in TT-Line’s borrowing facility from $700 million to $990 million with the Tasmanian Public Finance Corporation (TASCORP).

“The funding requirements … have increased significantly as a result of an escalation in the construction cost, due to a number of factors including civil construction cost increase, project staging and delayed access to the site,” Mr Grainger said.

A big red and white ferry sails away from the camera at dusk.

The replacement of the existing Spirit of Tasmania ferries has been beset by delays and cost blowouts.(ABC News: Monte Bovill)

TT-Line was keen to point out that TasPorts had delayed its access to the site.

TasPorts is now upgrading two other berths as an interim measure.

Despite this new funding estimate being provided in December, the public was not informed until June 25, via a government press release four days after parliament rose for the winter break.

And in May, Labor had asked the government whether the project would cost about $350 million, to which Transport Minister Eric Abetz responded “no”.

A government spokesperson explained this by saying that, at the time of the question, there was “no latest estimate”.

The $375 million figure appeared in December, was rescinded in March during the government caretaker period, then reappeared again in June.

The new ships are now approaching completion, with one passing its first sea trials.

How they will be accommodated at Devonport when they arrive, is another matter altogether.

Questions over timing of decisions

But back to Finland.

RMC’s problems weren’t going away, and, in Tasmania, things may have been complicated by an election being called on February 14.

The day after the election was called, TT-Line approved a change to payment milestones with RMC.

Two weeks later, it attended Treasury briefings with the government and Labor, where RMC’s difficulties were raised.

On March 6, RMC sent TT-Line a letter asking for more money, and in the days that followed, TT-Line executives travelled to Finland to meet with RMC, which was providing updates to the Finnish government.

Labor claims that the Finland government has a 20 per cent stake in RMC – a figure that wasn’t denied – due to RMC’s defence construction arm, which is financially separate from the commercial arm.

The side of a ship under construction with Spirit of Tasmanian in red text on a white background.

TT-Line says it was worried about making shipbuilder RMC’s financial problems public.(Supplied: RMC)

RMC asked for 50 million euros — about $81 million — to continue the Spirit of Tasmania project, but TT-Line made a counteroffer of 30 million euros

That was rejected by RMC, and so on March 21, the T-T Line board agreed to pay the full 50 million euros.

“We considered very carefully the request from RMC in terms of what we should and shouldn’t do, up to 50 million euro, which was their request,” Mr Grainger said.

“They said 30 million was not going to do it.

“The board considered additional information received from the Finnish government, and the options open to it.”

Late fees were also removed from the contract, but the final cut-off date, or ‘drop-dead date’, was retained.

The overall project increase was estimated to be 100 million euros. 

The remaining 50 million euros, and any additional funds, had been underwritten by the Finnish government.

The decision was made two days before the Tasmanian election, held on March 23, and the amended contract was signed on April 4.

The state treasurer, Mr Ferguson, was informed on April 5.

The public wasn’t informed until Labor started asking questions when parliament returned.

TT-Line ‘not taking money out of any part of the government’

During the parliamentary inquiry on Friday, TT-Line argued it did not have an obligation to keep the public informed before, during or after those negotiations.

That included its increased borrowing facility from state-owned finance corporation, TASCORP.

It received advice from Treasury that it could sign the amended contract during the caretaker period, as it was an existing contract and did not require a decision by government.

TT-Line representatives and MPs sit opposite each other at a long table during a committee hearing

The Public Accounts Committee heard from TT-Line on Friday.(Supplied: Parliament of Tasmania)

Mr Dwyer said Tasmanians should be confident that the money borrowed via TASCORP would be paid back.

“The Tasmanian government is not putting money into TT-Line for the new ship build, or for port infrastructure,” he said.

“All of the money for this is being catered for within TT-Line under debt.

“So our business will pay that money back over a period of time, we’re not taking money out of any part of the government. It is totally as part of the state-owned company to manage our debt levels.”

The first of the two ships is expected to arrive in Tasmania by the end of the year, and will undergo further testing in Hobart before heading to Devonport.

The wharf upgrades are expected to be finished by the start of 2026.

For now, the two existing ships will keep making the trip between Geelong and Devonport, while local tourism operators are hoping there won’t be further delays.

And Mr Ferguson has called on both TT-Line and TasPorts to keep him updated.


Posted , updated 

Source link